Yellow Brick Road (YBR) Holdings has rejected a takeover bid from Ron Brierley’s Mercantile OFM, arguing it undervalues the company.

Mercantile’s offer is nine cents for each YBR share, but on Friday the company was trading at 10 cents.

To acquire all the shares in YBR it does not already own would cost Mercantile $20.3 million. It holds $6.6 million in cash and has access to a revolving funding facility through Mr Brierley.

YBR Chairman Mark Bouris says the bid “materially undervalues the existing and future value of the company, and is opportunistic in its nature, timing and pricing”.

In its bidders’ statement, Mercantile says it plans to continue the YBR business.

But it has said it would conduct a strategic review of the business because it has not been given commercial information beyond that in last year’s annual report.

YBR provides general and life insurance, mortgage broking and wealth management advice.

Mercantile says its bid follows YBR’s poor performance in recent years. It has a 19.97% stake and its investment has declined by 35.9% since November 2016.

“Mercantile believes such performance warrants… making the offer and seeking influence regarding YBR’s strategy and operations,” it says.